The results of a survey have provided some encouraging news for the United Kingdom economy. Data showed that the growth of businesses in the services and manufacturing sectors of the country in the month of June was the fastest more than five years. The data indicated a recovery of the sector from the severe impact of the novel coronavirus pandemic and the related lockdowns imposed to prevent the spread of the disease.
In June, the IHS Markit/CIPS final composite Purchasing Managers’ Index (PMI) rose to 57.0 from 47.7 in June which was the highest growth since June 2015. It was also close to the provisional flash reading of 57.1. The services PMI also rose, to a five-year high of 56.5 from June’s 47.1, again a fraction below the flash reading.
“UK service providers are starting to see light at the end of the tunnel after a record slump in business activity during the second quarter of 2020,” IHS Markit’s economics director, Tim Moore, said.
The rate of growth and not the level of output gets reflected by the PMI numbers. That has prompted some analysts and economists to predict that the British economy could take years to make up the record 25 per cent drop in output between March and April this year due to the pandemic.
Following three months of closure because of lockdowns to prevent the spread of the pandemic, the government allowed the opening up of restaurants, cafes and pubs to diners and drinkers on July 4. The government had started to partially lift the restrictions in mid-June with non-essential businesses being allowed to operate.
While there was a strong uptick in house purchases in June, there was a recovery in retail sales in the same month to almost the same levels as they were in eth same period a year ago.
However there has been a much slower recovery for some of the other sectors such as entertainment and arts venues. However warnings of a leveling off of growth rates after an initial burst of pent-up demand were issued by some Bank of England officials.
But indications that most employers plan to cut staff were reflected from the composite PMI’s employment index remaining unchanged from June to July and as still well below 50.
The official unemployment rate of Britain is yet to rise largely because of a government job support programme which is slated to come to an end in October and would require employers contributing to thee program starting from that month.
“The weakness of the employment figures reported in July is clearly a cause for concern and likely to hold back the longer-term recovery in business and consumer spending,” Moore said.
(Adapted from Nasdaq.com)